Strapped Greece Taps U.S. Diaspora

By

Matt Phillips and

Jonathan Cheng

Updated March 10, 2011 12:01 a.m. ET

When Athens calls,
Ioannis Arvanitis
will be ready with $10,000.
Dennis Valerios
has no money and no job, but he is willing to pony up $500.
Nicos Constantinou
says national pride dictates he will probably chip in a few bucks.

Greece is about to take them up on the offer. The country's finance ministry this week put a plan in motion to sell $3 billion of bonds to expatriate Greeks living in heavily Hellenic swaths of the U.S. including the Astoria neighborhood of Queens, New York, home to Messrs. Arvanitis, Valerios and Constantinou.

"I will do what I can do—I run a business, but I'm not rich," Mr. Arvanitis, 58 years old, said on Wednesday as he served up baklava and espresso to customers at his new cafe Omonia Next Door (a sister to the store next door named Omonia). Mr. Arvanitis, who immigrated in 1974, said he would be willing to buy about $10,000 of the bonds, after getting his wife's approval.

"I'm proud of Greece—we gave the world democracy and history and art, everything," he says. "Greek people are smart people, but they don't know how to run a government."

Greece is hoping Mr. Arvanitis and others in neighborhoods of Boston and Chicago will help it pull out of its €340 billion ($472 billion) predicament. Estimates about the size of the Greek American community vary. Greece's Ministry of Foreign Affairs puts the U.S. Greek community at around 2.5 million.

Greece also has indicated it will reach out to expats in Australia and Canada, both also home to large Greek populations.

The so-called diaspora bonds will be marketed to U.S. investors of Greek descent during the first half of 2011, a senior Greek finance-ministry official said Wednesday, after the financially strapped Mediterranean nation filed shelf-registration with U.S. regulators to proceed.

ENLARGE

Jimmy Panagiotou says he won't be buying. 'The people in Greece did this to themselves.'
Jonathan Cheng/The Wall Street Journal

Diaspora bonds, sold by countries to their expat community, have been successfully used by Israel and India. Israel has offered an array of diaspora bonds since 1951 to raise money from the global Jewish community. It is as much about ancestral bonds as financial ones, says
Dilip Ratha,
an economist at the World Bank who studies migration and remittances.

"Diaspora bonds can be a great way to tap directly the wealth and goodwill [desire to give back] of the diaspora," Mr. Ratha wrote in an email.

But while expat Israelis have made out well on their investments, the future isn't so certain for Greek-Americans.

More

Greek debt was downgraded by Moody's Investors Service by three notches this week, sending it further into "junk" territory.

The Greek government official said the country is aiming to pay a yield of less than 5% on the debt, which would mature in between three and 10 years. That is far below what Greek bonds fetch on the open market. Two-year Greek debt has a yield of 15%. And many worry that those who lend money now may not get it all back.

Many in the bond market fear a default or restructuring is likely in the next few years. And, from an historical perspective, Greece's track record as a creditor is checkered. It has defaulted several times in the past.

But for those of Greek ancestry, buying Greek bonds would be more than just a cold-blooded business calculation.

Mr. Constantinou, who runs his Athens Cafe a few blocks away from the Omonia, says that while he will help, his support is somewhat grudging.

ENLARGE

Dennis Valerios pledged $500, though he says he has no job.
Jonathan Cheng/The Wall Street Journal

"I'll help as much as possible —I'm proud of my heritage," says Mr. Constantinou, 43, who emigrated from Greek Cyprus in 1989 and opened the Athens in 1992. But Mr. Constantinou says Greece "is going to have to learn to be more like America."

"If I'm not productive, this place will shut down, and the sooner they realize that, the better," he said motioning to his cafe, where a few afternoon patrons were sipping coffees and eating pastries. "Greece is a beautiful and blessed country," he says, "but unfortunately, people took that for granted."

Ted Spyropoulos,
president of the U.S. branch of the World Council of Hellenes Abroad, an umbrella group for Americans with ties to Greece, is expecting a strong response from his countrymen. He says his organization first broached the topic of a diaspora bond with the Greek government.

"We believe they will respond very positive to this," Mr. Spyropoulos says. , with the next program likely to target Greek-Canadians, the official said

As for the risks of investing in Greek debt, Mr. Spyropoulos says he has done the math and figures that in theory, if 3 million Greek Americans each put in $1,000, Greece will make its number.

Mr. Valerios, a 61-year-old immigrant from the Greek island of Kefalonia, sat in Athens Square in Astoria, and pledged $500, even though he is a painter and has no permanent job.

Others are less forgiving of their former compatriots.

"Absolutely not," says Jimmy Panagiotou, manning the counter at Greek Music & Video Superstore. "The people in Greece did this to themselves."

The 27-year-old just returned from a trip to Athens and declares the situation "ridiculous."

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